Dorothy Santosuosso does a lot of investing in the stock market and is a frequent...
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Dorothy Santosuosso does a lot of investing in the stock market and is a frequent user of stock-index options. She is convinced that the market is about to undergo a broad retreat and has decided to buy a put option on the S&P 100 Index. The put carries a strike price of 905 and is quoted in the financial press at $14.50. Although the S&P Index of 100 stocks is currently at 900.00, Dorothy thinks it will drop to 850 by the expiration date on the option. How much profit will she make, and what will be her holding period return if she is right? How much will she lose if the S&P 100 goes up (rather than down) by 25 points and reaches 925 by the date of expiration? The profit from this investment would be $ x. (Round to the nearest cent.) If she is right, her holding period return will be x %. (Round to the nearest whole percent.) If the S&P 100 goes up (rather than down) by 25 points and reaches 925 by the date of expiration, she will lose $ x. (Round to the nearest cent.)
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